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Friday
Nov092012

The Election and Corporate Governance: A Lesson in Demographics

If there has been a single common subject in the analysis of the 2012 presidential election, it has been the role of demographics.  Apparently something like 45% of President Obama's votes came from people of color.  He rolled up huge margins with Latinos, African Americans and, less discussed, Asians (Asians favored the President 73% to 26%). 

Then there were women, with the President chalking up a double digit lead (12%) with that group as well.  As one study noted:  "Since 1964 women have comprised a majority of the eligible electorate, but it was not until 1980 that the percentage of eligible women who actually voted surpassed the percentage of qualified men casting ballots . . . "

These demographics caused Politico to ask whether the Republican Party was Too old, too white, too male and whether this amounted to a "glaring structural weaknesses in the GOP".  See also Vote Data Show Changing Nation.

In the area of corporate governance, the exact same question can be asked about corporate boards and about the judiciary in Delaware.  Corporate boards of public companies consist of about 15% women (one study of the 1500 largest public companies put it at 12.7%) and 10% people of color.  For the most part, this means one woman and one person of color on a corporate board.

Similarly, Delaware determines the corporate law for an entire nation.  Yet, as we have noted, it is a remarkably undiverse group of judges.  There is, among the 10 jurists on the Chancery Court and the State Supreme Court, a single woman.  They often have similar backgrounds and attend similar law schools.  Moreover, as we have also noted, this lack of diversity can increasingly be contrasted with a more diverse federal judiciary. 

Corporate boards and the Delaware courts should consider whether they also have a "glaring structural weakness" that should be seriously considered.  For the Delaware courts, the lack of diversity provides another argument for preempting state statutes and transferring matters to the federal government. 

For public companies, the lack of diversity raises concerns over the quality of the board.  Companies that figure out the importance of diversity before the others may well obtain a competitive advantage in the market place.  See Essay: Neutralizing the Board of Directors and the Impact on Diversity

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